Thursday, January 22, 2009

Endgame 4: Agriculture, Resource Extraction and Famine

The endgame isn't limited to the global financial meltdown or the complete repudiation of existing debt, policies and financial structures; it includes the production of abundant food with cheap abundant energy and the resulting fertilizers and pesticides.

Knowledgeable reader Bart D. from Australia recently provided an eye-opening report on the endgame in agriculture. We all know highly productive agriculture depends (like everything else) on petroleum to move products and power equipment, but it's not just transportation which is dependent on fossil fuels: it's the fertilizer, too. And the same endgame applies to all other traditional resource extraction structures as well. Here are Bart's comments:

"It seems like a lot of observers who are following the financial problems are being insidiously distracted from the real 'crisis' looming large over the future.

The entire economic system seemingly requires abundant and cheap energy to enable the stupendous amounts of waste that a modern economy creates through its function.

It now likely that we can no longer look to the past to estimate the future. The key condition of abundant resources and spare capacity of the earth to provide for an expanding human population in probably no longer valid.

The very first time that people in developed countries experience a real shortage/ unavailability of fuel/food and discover what happens when a system gets compressed by a steadily sinking resource 'ceiling' … we need to expect severe ramifications.

At this point I haven't seen anyone predict whether the developed nations of the world can gradually decline to a more equitable standard of living …. Or if the demands for war to keep a greater share of the resources to ourselves gains traction and results in the re-conquest/colonisation of africa.

I just can't see a way beyond 2020 that doesn't involve a massive slide in wealth for people of developed economies or a very serious de-population event (ie military or socio-economic war) that brings the total global population back into balance with what the planet needs to provide us with to live our current lifestyle.

It seems like any investment that isn't related to good agricultural land and the capacity to farm it and protect it …. Is not really a relevant investment for the future we are heading towards. Marc Faber has picked that idea correctly.

I work in Rural Business and I can see very grave challenges facing our ability to avoid the biggest killer of people throughout history: Famine. (emphasis added--CHS) We need too many resources, that are now in serious supply decline, to keep going as we are.

Its not realistic to 'go organic' at our current population level and expect to feed everyone … and that’s without the growing problem of climate uncertainty adding to the mix. There IS NO ALTERNATIVE food production system that can sustain us. Only when population levels fall to pre 1860's levels (ie before the age of mineral fertilisers) will things stabilise again.

I believe, from a historic perspective, a breakdown in agricultural systems/ productivity and the resulting famine has been responsible for more civilisations /societies collapsing than any other factor. It’s THE thing that no one is seeing coming right now (whilst they worry about how to ride the stock market gyrations and argue the pro's and Cons of owning gold or government bonds) and that’s why it will be such a massive event. I suspect that some time before 2020 an ounce of silver will equal the value of a bucket of wheat in some parts of the world. (ownership of gold probably having been restricted to a small military/social elite class).

I feel sorry for the people of Africa. As the weakest continent, with a lot of resources we (and China) want, they can expect the fate of the Native Americans. They've got what we want and they'll be 'eased' out of the way. It will be the 1800's revisited.

At this point I asked Bart about the prospects for alternative energy in the farm-economy, such as wind-generated electricity being used to power tractors.

"We have some very expensive new wind farms my region. They barely supply enough electricity to power the basics for our regional population of about 15 thousand people. We still use a lot of power from a coal fired plant 300km away. I can't imagine having enough generating capacity to run a fleet of farming vehicles.

I also can't imagine where all the important metals used in battery/electric motor production are going to come from. I believe (according to others) we are on a downwad slope for mining and refining metal ores in that the ore grades are getting consistently lower and therefore requiring increasing amounts of energy to mine and process them into useful things.

The really major problem with Ag production at the moment though is the amount of Natural Gas used to make the nitrogen fertilisers and ag chemicals. We suffered a price rise in nitro fertilisers here of 300% in two years. Ag chemicals to control pests and diseases also had big rises. When inputs get as high as they are now, (and we HAVE to use them to get target yields and quality standards that make farming viable), when you have a dry year and fail to harvest you go broke in a serious way.

That is, the dollar loss of a crop failure now are up to 3 times higer than two years ago. That means 1 bad year now actually puts you back 3 years in dollar terms. Climate variability here has resulted in 3 failed spring rains in a row and many farmers who have been on the land for 4 or 5 generations are walking away bankrupt because they suffered the financial equivalent of 9 years of drought. Also bear in mind that our regional grain output is dropping as a result of bad seasons so we have less to export.

In other parts of our country Multi-million dollar rice mills sit idle now as there is no water in the rivers systems to irrigate. Our government is paying small block fruit growers to walk off the land and bulldoze their orchards. Why? We need the remaining water to supply cities with a combined population of about 1.2 million. Fresh food prices have doubled over last two years because irrigators are short on water and big farms are buying the water from small farms at unheard of prices to keep things functioning.

Last year, water allocations on our Murray river (biggest system in Australia) were at less than 10% of 'normal.'

America is fortunate that it still has an abundance of good agricultural land with good rainfall compared to your population size. You should invest in low energy ways to make it work well. You, along with Russia and Eastern Europe and New Zealand should be able to feed yourselves and others in a low energy world. I think Australia is OK for food as well, but countries with a high people to ag. land ratio are heading for trouble in a world with restricted access to mineral fertilisers to make the land fertile enough to yield the required food.

All we need now is a war to use up a large portion of available world nitrate production capacity and the problem of 'peak food productivity' will become apparent very rapidy.

Anyone thinking they can grow enough food to survive in a suburban back yard in a energy scarce world is deluding themselves. Take a calorie counter, a pocket calculator and a crop maturity/agronomy guide and do the maths. It won't add up to the daily calorie requirements of the 2-4 people living in an average house with an average garden, especially if your bankrupt government can''t afford to keep maintaining the water distribution network. (see Zimbabwe)

Whilst the majority wring their hands over what impact the financial crisis will have on their retirement plans or employment future ... bigger things are happening more worthy of angst and multri-trillion investments.

I don't understand why Americans are not decending on washington en-masse to stop the rot your congress and federal reserve are pumping out. You need to direct those trillions into re structuring your transport and agriculture sector. Stop the government subsidies that corrupt your farming system. The world won't want your worthless dollars and financial instruments in the future ... but a hungry person sitting in his shimmering desert or the tower blocks of Dubai will give you all the oil you want for some good American food.

The problem they don't mention is that 'extractable reserves' will now shrink even without any actual extraction … because of the dwindling supply of cheap energy needed to mine and process what are now 'low grade' ores.

To some, the history of nonrenewable resource exploitation seems to contradict the idea of an energetic limit short of mining common rock and "burning" seawater [10]. During the past 150 years large increases in the earth-resource base of industrialized society have been attained. By increasing the efficiencies of discovery, recovery, processing, and application of such resources, we have been able to find and exploit leaner, deeper, and more remote deposits. By discovering and developing new methods of utilizing previously worthless materials we have created resources where none existed.

Important in this rapid technologic advance has been a progressive lowering of the cost of energy per unit of work or useful heat obtained. Cheaper energy, along with technological ingenuity and discovery, has greatly extended the availability of nonenergy resources. In 1900 the lowest grade of copper ore economically minable was about 3 percent; today the economic cutoff has fallen to about 0.35 percent; at that grade each ton of refined copper produced requires the breaking, transport, and milling of almost 300 tons of rock and, in addition, the removal of perhaps an equal amount of waste or barren rock.

A great deal of energy-about 26,000 kilowatt-hours [11], the equivalent of the energy in about 4 metric tons of Wyoming coal-is required to produce a metric ton of copper today. "(end exceprt)

This scenario equally applies to all the inputs (especially fertilisers and transport fuels) used to produce food.

On the upside, a lot more people will be needed in future to grow food. This means fewer lawers, bankers, accountants and other drains on society, who will be now required to work fields and collect human waste to fertilise them.

It will be interesting to see how long it takes for this huge economic re-structure to play out. At nearly 10% depletion of oil this coming year (IEA) conversion will presumably be forced onto us in under 10 years. We will then be living in an economic system like Cuba, who lost their energy supplies when Soviet system collapsed.

Chris Martenson (see his website) defined money as a claim on future human labour. I like that.

In order for there to be future human labour, do we need banks?

No.

Do we need Cars, superannuation funds and the stock market.

No.

Do we need food and a means to get it to where it is needed to fuel the humans who do the labour?

Yes. Of course.

Let's just say that money is a claim on food and water FIRST. Everything else is really only parsley on the plate making the world look good.

We can pressure government to make planning and spending for sustainable food production number 1 priority now ... or we can wait for Mr. Market to demonstrate that 'corrections' also happen to markets where individual people are the units of accounting.

We also need to ask ourselves if the average billionare really expects to be able to claim THAT MUCH future human labour. What would an average billionare DO with a claim on 100 million man hours (at $10 per hour)? Build Pyramids like an Egyptian pharaoh? Conquer the world like Alexander the great? Can a billionare realistically claim those hours? Either the price of labour has to rise dramatically or a lot of dollars have to vanish to moderate this apparent imbalance. Dollars are vanishing pretty fast now, I wonder if that mean inflation in wages will also kick in soon to bridge the gap?

I wonder what the historic average is for how many man hours per year the top 1% of wealthy men commanded? Maybe a dollar should be re-badged the "Manhour". Maybe these 'manhours' should come with an expiry date to prevent people hoarding them and doing stupid things like making them into derivatives, etc?

Thank you, Bart, for this excellent analysis. There is much sobering "food for thought" in contemplating the endgame depletion of soil, mineral fertilizer and cheap fossil fuels. Clearly, the obsession with "cleaning up the financial sector" so everyonce can start borrowing more than they can afford again is not just misplaced--it's near-suicidal.

I know many observers believe genetically modified seeds which manufacture their own pesticides and additional nutrition via extra proteins, etc. may provide the answer, but even GM seeds need undepleted soil, water and transport to market. And the history of mono-crops (i.e. losing diversity of the genome via using only one variation) is not exactly encouraging.

Thus GM is easily raised from "potentially useful on the margins" (akin to shale oil) to "technological savior"--that is, a technology "fix" will keep the status quo chugging along with virtually no disruption in present production and price.

Unfortunately we're dealing with complex, dynamically interacting systems, not a single issue. Thus "magic bullets" like GM grain seeds (patented and owned by corporations, by the way) are doomed to merely marginal effects on a planetary scale.

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